zambia case study - home | food and agriculture ... production and productivity zambia case study by...

FINAL AFTER SIKOMBE CHECKS – 27/08/12:

COMPARATIVE EXPERIENCES IN AGRICULTURAL FUNDING FOR INVESTMENTINTO CAPITAL FORMATION AND FOR OTHER INTERVENTIONS TO ENHANCE

AGRICULTURAL PRODUCTION AND PRODUCTIVITY

ZAMBIA CASE STUDY

by

Derrick Sikombe

Agricultural Economist

Ministry of Agriculture and Cooperatives, Lusaka, [email protected]

Southern African Confederation of Agricultural UnionsPretoria

August 2012

SET OF DOCUMENTS FROM THE SACAU-FAO STUDY ON AGRICULTURAL INVESTMENT

SACAU and FAO have jointly sponsored a review of agricultural investment

mailto:[email protected]

2

approaches in Malawi, South Africa and Zambia. The documentation of this study comprises of four documents, as follows:

1. REGIONAL SYNTHESIS REPORT - Agricultural Investment - Approaches and Country Experiences of Malawi, South Africa and Zambia. By Mafa E. Chipeta (Study Coordinator), P.O. Box 51610, Limbe, Malawi. [email protected]

Three country case studies prepared by economists in Malawi, South Africa and Zambia respectively; these are also being published individually:

2. MALAWI CASE STUDY - Comparative Experiences in Agricultural Funding for Investment to Enhance Agricultural Production and Productivity. By Ian Kumwenda, ANAMARC Consortium, Private Bag 107, Lilongwe, Malawi [email protected], [email protected]

3. SOUTH AFRICA CASE STUDY - Comparative Experiences in Agricultural Funding for Investment to Enhance Agricultural Production and Productivity. By ZimbiniMdlulwa, AgriculturalResearchCouncil, 1134 Park Road, Hatfield, Pretoria, 0001 South [email protected]

4. ZAMBIA CASE STUDY - Comparative Experiences in Agricultural Funding for Investment to Enhance Agricultural Production and Productivity. By Derrick Sikombe, Ministry of Agriculture and Cooperatives, Lusaka, Zambia. [email protected]

The contributions of the authors and of any contacts and partners they had in their work is gratefully acknowledged.





3

FOREWORD

Southern Africa has a diversity of economies ranging from several that depend largely on minerals, one (South Africa) -depending on a combination of mining, manufacturing and services, to the majority which rely on farming as the mainstay of their peoples’ livelihoods. Even where most value-added comes from outside agriculture, however, many people rely on this sector for their direct food security and for employment; enclaves of mining or manufacturing are yet to offer the opportunities which the fast-growing populations can readily rely upon for mass employment and income. It is thus important for this sector to succeed and it is for this reason that adequate and effective investment is considered important to study and act upon.

The Southern African Confederation of Agricultural Unions (SACAU) and the Food and Agriculture Organization of the United Nations (FAO) saw the need to seek some baseline information on how investment is going in Southern Africa. They wished to start with a few countries in an exploratory fashion, with decisions on expansion to other countries to be informed by the initial findings. Thus towards the end of 2011, they selected Malawi, South Africa and Zambia for first attention and commissioned case studies on them. The three countries have contrasting policies and approaches in funding agriculture; they also differ in levels of development. The choice of countries was partly influenced by the fact that the three countries have all achieved at least self-sufficiency and even surpluses for staple maize due to their agro-expenditure. One - South Africa, has sustained its agricultural success for a long time; Malawi and Zambia have succeeded more recently, based mostly on government subsidies for fertilisers and seeds and (in the case of Zambia) on setting favourable farm gate prices for smallholders.

I wish to draw the attention of all readers to the regional synthesis report for Southern Africa which carries the findings of all three country case studies: SACAU welcomes any criticism, additional insights, information and partnerships. In that document, particular attention may be given to the sections on “Key Messages” and on “Conclusions and Recommendations with Potential for Follow-Up”.

For this country report on Zambia, there have been challenges in availability of investment information for both large and small-scale agricultural investment. For the latter category of farming, the author has resorted to general household and livelihood surveys from which he has extracted useful but incomplete information. This has, however, allowed a glimpse of the encouraging interest of even small farmers to invest in capital assets, with the unexpected message that they do not just focus on agricultural investment but often more at other fixed assets needed for their livelihoods including housing and multipurpose equipment that is only partly used for agricultural production. The survey information also allows a glimpse of the relative emphasis on on-farm as opposed to processing investment in the agricultural value chain. Naturally, given its high profile, Zambia’s subsidy programme for inputs (mainly for maize) has received great attention, including its apparent effects on balance in policy support to large-scale and small-scale agriculture and its likely implications.

I take the opportunity to thank all those in Zambia who shared their time, information and views. I acknowledge with thanks the dedicated efforts of Derrick Sikombe who carried out the Zambia case study. I also thank the Ministry of Agriculture and Cooperatives for releasing Mr.Sikombe to carry out this work.

Ishmael SungaChief Executive Officer

4

SACAU, Unit 11. Centurion Office Park257 Jean Avenue, 0157 Centurion

[P. O Box 10480 Centurion 0046, South Africa]TABLE OF CONTENTS

EXECUTIVE SUMMARY..................................................................................................................................................6

1.INTRODUCTION.............................................................................................................................................................7

1.1Study Objectives......................................................................................................................................7

1.2Study Approach, Data Sources and Analysis...........................................................................................7

2ECONOMIC ENVIRONMENT.........................................................................................................................................8

2.1Gross Domestic Product (GDP)...............................................................................................................8

2.2Inflation...................................................................................................................................................8

2.3Exchange Rates........................................................................................................................................9

3AGRICULTURE IN PROFILE..........................................................................................................................................9

3.1Structure of the Agriculture Sector..........................................................................................................9

3.2Livestock Production.............................................................................................................................10

3.3Agricultural Sector Policies and Priorities.............................................................................................10

3.4Role of the NEPAD-CAADP Process in Coordinating Donor Inputs.....................................................10

3.5Large-Scale Land Leases (Land Grabs).................................................................................................11

4AGRICULTURAL INVESTMENT AND OTHER FUNDING......................................................................................12

4.1Subsidies................................................................................................................................................12

4.2Selected Impacts of FISP Subsidy Programme......................................................................................12

4.3Gross Fixed Capital Formation in Agriculture.......................................................................................13

4.4Public Budget Allocation and Expenditure............................................................................................13

4.5Trends in Public Sector Agricultural Funding........................................................................................14

4.6Motivations/Driving Forces for Public Funding....................................................................................14

4.7Large Private Agriculture Investment....................................................................................................14

4.8Fixed Capital Formation by Small-Scale Famers...................................................................................14

4.8.1Number of Households Owning Agricultural Assets.........................................................................................15

4.8.2Number of Agricultural Assets Owned by Households......................................................................................16

4.8.3Value of Agricultural Assets Owned by Households..........................................................................................18

4.9Fixed Capital Formation by the Commercial Famers.............................................................................19

...................................................................................................................................................................19

4.10Capital Formation by Rural Households..............................................................................................19

5CONCLUSIONS..............................................................................................................................................................24

6REFERENCES.................................................................................................................................................................26

5

7ANNEXES........................................................................................................................................................................27

6

List of Tables

7

List of Figures

8

Abbreviations

AfDBAfrican Development Bank

AUCAfrican Union Commission

BOZ Bank of Zambia

CAADPComprehensive Africa Agricultural Development Programme

CFS Crop Forecasting Survey

CSO Central Statistical Office

FDIForeign Direct Investments

FISP Farmer Input Support Programme

FRA Food Reserve Agency

GDP Growth Domestic Product

GRZGovernment of the Republic of Zambia

Ha Hectares

IAPRIIndaba Agricultural Policy Research Institute

JASZJoint Assistance Strategy for Zambia

MACOMinistry of Agriculture and Cooperatives

MLFDMinistry of Livestock and Fisheries Development

MoFP Ministry of Finance and National Planning

MT Metric Tonnes

NAPNational Agricultural Policy

NEPAD New Partnership for Africa's Development

NPCA NEPAD Planning and Coordinating Agency

ODA Overseas Development Assistance

SEAStandard Enumeration Area

SNDP Sixth National Development Plan

SS Supplemental Survey

ZDAZambia Development Agency

9

EXECUTIVE SUMMARY

Zambia has vast resource endowment including in land, labour and water (GRZ 2007). The abundant natural resources and human labour, including the prevailing satisfactory socio-economic environment, offers good prospects for increased investment in the agricultural sector. The overall goal of the study was to collect country information for assessing agricultural investment especially fixed capital formation in and for agriculture by the different economic agents, i.e. the public sector, the private sector (domestic and external) and farm households in Zambia. Focus was to provide an overview on the trends of the country’s agricultural investment, especially on primary on-farm production with a view of understanding how Zambia can improve such investment.

The study period was from 2005 to 2010 and the agriculture sector was defined to include only crops and livestock. Data for this survey was obtained from various national data sources, key of which include the Central Statistical Office (CSO) of Zambia, the Bank of Zambia (BOZ), Ministry of Agriculture and Cooperatives (MACO), Ministry of Livestock and Fisheries development (MLFD), Ministry of Finance and National Planning (MoFP), Indaba Agricultural Policy Research Institute (IAPRI)and the Zambia Development Agency (ZDA).

Public budget flows into fixed capital formation has remained relatively insignificant during the period. On the contrary, public investments in consumable inputs such as goods and services as well as subsidies and social benefits account for a large proportion of public expenditure in agriculture. Foreign Direct Investment (FDI) has generally been increasing over the period in contrast to local investment, which has been both low and erratic. The two major likely factors contributing to the current structure of public funding, allocations and disbursement to the agriculture sector are i) the limited financial resources and ii) the desire by Government to continue playing a role in agricultural production and marketing.

There is strong evidence of capital formation by small-scale farm households in Zambia. The rise in the number of several agricultural assets owned by agricultural households across the country (such as trucks and lorries, hammer mills, rippers, shellers, sprayers, pickups, vans and cars, bicycles, motorcycles and hand driven tractors) suggests that the small and medium scale farmers have been increasing their investment in these implements over the years – survey data are summarized for 2004 and 2008.

Zambia has a huge potential for growth and competiveness in the livestock sub-sector but faces high input costs especially of feed and drugs. Also, animal diseases such as Contagious Bovine Pleuro-Pneumonia (CBPP), Foot and mouth disease (FMD) and African swine fever have continued to threaten the growth of the livestock sub-sector. As such, the government of Zambia has embarked on an ambitious programme of setting up disease-free zones for livestock in the country.

10

The Government in Zambia has been implementing a subsidy programme known as the Fertilizer Input Support Programme (FISP) which is meant “to improve crop productivity and household food security among targeted vulnerable and viable households and thereby contribute to poverty reduction”. However, the performance of the subsidy programme has been less than expected. Some believe that the FISP has only gone as far as creating an inefficient and difficult-to-sustain production and marketing system that is leading to reduced participation by the large scale farmers and the commercial private sector in the maize sub-sector.

In Zambia, NEPAD and its CAADP, being aligned to the country’s strategies with national development priorities, targets and country systems, are playing an important role in ensuring donor support and input (including resource allocation).

1. INTRODUCTION

1.1 Study Objectives

The overall goal of the study was to collect country information for assessing fixed capital formation in and for agriculture by the different economic agents, i.e. the public sector, the private sector (domestic and external) and farm households in Zambia. Focus was to provide an overview on the trends of the country’s agricultural investment, especially on primary on-farm production with a view of understanding how Zambia can improve such investment. While the standard definition of “agriculture” includes crops, livestock, fisheries and forestry, for the purposes of this study attention focused on crops and livestock only. The reference period for the study was from 2005 to 2010, with no reference to earlier years than 2000. The data obtained through this study was used for drawing cross-country lessons from Zambia, Malawi and South Africa of possible value beyond their borders.

1.2 Study Approach, Data Sources and Analysis

The process for achieving this research objective involved a desk study as well as obtaining appropriate data from various national data sources, key of which include the Central Statistical Office (CSO) of Zambia, the Bank of Zambia (BOZ), Ministry of Agriculture and Cooperatives (MACO), Ministry of Livestock and Fisheries development (MLFD), Ministry of Finance and National Planning (MoFP), the Indaba Agricultural Policy Research Institute (IAPRI),Zambia Development Agency (ZDA) and selected other sources. Data for this study was collected largely for a period from 2005 to 2010 on a number of variables and analysis of such data involved coming up with annual trends for most variables. In some cases, however, data analysis involved measuring the relationship that may exist between variables.

There have been clear shortcomings in the present attempt to study agricultural investment; most relate to information gaps. There is no doubt that the level of investment and capital formation in agriculture, especially for the private sector (including the small holder farmers) would have been better investigated if sufficient data was available that would support corporate and household level analysis. In the case of estimating capital formation for primary on-farm production by the small holders, data from of IAPRI’s Supplemental Survey results and the Living Conditions Monitoring Survey Results of CSO provided useful insights into capital formation in agriculture.

11

In addition, the resources allocated to collect relevant data for the study was not sufficient. For instance, for a number of data sources, the data for this study was not in the exact format required. Elaborate and time-consuming data manipulation had to be carried out in order to get what was relevant for this study.

12

2 ECONOMIC ENVIRONMENT

Real GDP and other measures of the economy such as inflation and the exchange rate of a national currency reflect how well the economy is performing. The presentation below describes the performance of Zambia’s economy using these measures.

2.1 Gross Domestic Product (GDP)

During the period from 2005-2010, Zambia registered improved economic growth as measured by the real gross domestic product. Real GDP increased annually at 5.3percent in 2005 to 7.6percent in 2010 as shown in figure 1 below. In 2008, however, the economy contracted slightly most likely due to the effects of the global financial crisis. Notwithstanding the slowdown of the economy experienced in 2008, the economy in Zambia saw a rebound on a path to recovery in 2009 and 2010.

The satisfactory performance of the economy during the review period was largely driven by growth in the mining, agriculture, manufacturing and construction sectors that grew by 58percent, 30percent, 18percent and 77percent respectively from 2005 to 2010 in real GDP. However, poor performance in other sub-sectors such as fishing, as well as the slowdown in the textile and leather industries sub- sectors in the same period contracted overall growth.

Figure : Trends in Real Gross Domestic Product (2005-2010)

0

1

2

3

4

5

6

7

8

2005 2006 2007 2008 2009 2010

Real GDP Growth Rate

2.2 Inflation

Sustained low inflation rates imply stability in prices. Zambia’s Government policy as articulated under the Sixth National Development Plan (SNDP) is to achieve and sustain single digit inflation rates. A review of the inflation rates during the period 2005 to 2010show it having been highest at 18.3percent in 2005 and later falling to 9.0percent in 2006. While Zambia again recorded an upward trend in inflation rates, reaching double digits for the years 2007 and 2008, inflation dropped to a single digit in 2010 as depicted in Figure 2.

14

2.3 Exchange Rates

When examined on a year to year relationship, the exchange rate of the Zambian Kwacha remained stable against major international currencies during the period 2005-2010, gaining by an average of 1percent per annum. However, when compared between 2005 and 2010, the Kwacha depreciated by 7percent, falling from K4, 464against the U.S dollar in 2005 to K4, 797 in 2010.

Figure : Trends in Inflation Rates (2005-2010)

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2005 2006 2007 2008 2009 2010

Inflation Rate (%)

Source: CSO

3 AGRICULTURE IN PROFILE

Crop and livestock production continue to be important economic activities supporting the livelihoods of a large number of households in Zambia, especially rural ones. It is estimated that about 80 percent of the people in Zambia are directly dependent on agricultural production for their livelihood (GRZ, 2010). Thus expansion of area under cultivation of major crops such as maize, sorghum and wheat as well as increased production of these food crops and livestock will directly lead to enhanced food security and improved livelihood of the Zambian people.

Whilst productivity has remained low for most crops, with average yields in these crops being low, overall, agriculture production and output has been performing well since 2005. Production of maize, the main staple food for Zambia, has been increasing over the years, reaching a record high of 2.7 million metric tonnes in 2010 (see Table 1). The area under cultivation for major crops such as maize, cassava, sorghum, wheat, and rice has been increasing during the same period. The increase in production has inevitably pushed down the price of most food crops especially maize, thereby improving access to the staple food for most households and communities.

While livestock numbers have been increasing, animal disease has continued to threaten the growth of the livestock sub-sector. Major diseases affecting livestock in

15

Zambia during the period include Contagious Bovine Pleuro-Pneumonia (CBPP), Foot and mouth disease (FMD) and African Swine Fever.

3.1 Structure of the Agriculture Sector

Agriculture in Zambia is practiced by a diversity of farmers, but with two main categories: small-and-medium scale farmers (largely subsistent farmers) and the large-scale farmers (considered as commercial). According to the 2009/2010 agricultural season’s Ministry of Agriculture and Cooperatives/Central Statistical Office (CSO) Crop Forecasting Survey (CFS)results, there are about 1.4 million small- scale farmers in Zambia and around 1, 500 large-scale famers.

Much of the large-scale agriculture is close to the line of rail and the Great North Road Corridor while the small-scale farmers are spread across the country. For maize, the major stable food in Zambia, the small-scale farmers have from 2005 to 2010 been contributing 70-90percent to total production annually with the large-scale farmers accounting for a corresponding 30-10 percent during the same period. The contribution of the large scale farmers to maize production has been reducing, registering a sharp dropof62percent from 2005 to 2010, largely on account of Government’s intervention in the maize value chain being greatly in favour of the small scale farmers. The provision of inputs to only the small scale farmers at the production stage is the most visible favour; but at the marketing stage, a single floor price is set for all maize producers which means that those who had subsidized production costs have the upper hand. Table 1 shows the maize production by category of farmers and the contribution of the large scale farmers in percentage terms to the production from 2005 to 2010.

Table : Maize Production by Category of Farmer (MT)

YearTotal

Production

Production by Large scale Farmers

Production by Small & Medium Scale

Farmers

Large Scale Contribution

(%)

2004/05 866,187 254,804 611,382 29

2005/06 1,424,439 313,519 1,110,919 22

2006/07 1,366,158 287,089 1,079,069 21

2007/08 1,211,566 218,728 992,838 18

2008/09 1,887,010 229,893 1,657,117 12

2009/10 2,795,483 306,540 2,488,943 11Source: CFS, MACO

For area planted to maize, the trend during the review period remained unchanged with the large scale farmers contributing between 4 – 7percent of the total area planted to maize, as shown in Table 2.

16

Table : Area Planted to Maize by Category of Farmer in Hectares (Ha)`

YearTotal Area Planted

Area planted by Large scale

farmers

Area Planted by Small & Medium

Farmers

Large Scale Contribution

(%)

2004/05 831,869 59,373 772,496 7

2005/06 784,532 51,612 732,920 7

2006/07 870,975 54,446 816,529 6

2007/08 916,740 37,049 879,691 4

2008/09 1,125,465 47,506 1,077,959 4

2009/10 1,242,271 59,723 1,182,548 5Source: CFS, MACO

Production of other cash crops such as soya bean is, however, dominated by the large scale famers: in 2010 approximately 77 percent of the soya-beans produced were grown by the large-scale sector. A significant proportion of the soya-bean production from the large-scale sector is processed and sold to the formal oil-and-stock-feed processing sector, which has created a ready market for the crop. Government intervention is also low on the soya bean sub-sector.

From the foregoing, it is evident that the large-scale sector tends to do better in enterprises where Government has little or no involvement or control.

3.2 Livestock Production

Many households in Zambia continue to depend on livestock production as their major source of livelihood. However, data on livestock numbers is only available for five years from 2000 to 2004. The available data, shown as trends in Figure 3, reveal that while cattle population is considerably higher than that of other animals (goats, pigs and sheep) it has been declining while the goat population has been increasing slowly and the populations of pigs and sheep have been stable at below 500,000 each over the same period.

Disease is a major challenge for livestock rearing and the actions of government to overcome it are given in Box 1. Table 3 shows the estimated amount of money in Zambia Kwacha that has gone into the creation of livestock disease free zones since the initiative started in 2007.

17

Figure : Trends in livestock numbers (2000 – 2004)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2000 2001 2002 2003 2004

Number of Animals

Cattle

Goat

Pig

Sheep

Box 1: Disease-Free Zones For Animals

Despite some of the constraints that characterize livestock production such as high input costs of feed and drugs, Zambia has a huge potential for growth and competiveness in the livestock sub-sector. Healthy livestock makes it easier for involved households to positively participate in their local as well as the national economy. Disease-free livestock, which allow increased sales of animals and products at home and abroad, has the potential to generate increased wealth and incomes and hence contribute to greater economic gains for Zambia. For this reason, the government of Zambia has embarked on an ambitious programme of setting up diseases free zones to control diseases affecting much of the livestock in the country.

These livestock disease free zones so far target the provinces which are among the highest producers of livestock in the country - Southern, Western and Central provinces - where livestock check-points, breeding and livestock service centres are being constructed. The Government of Zambia has committed much money in setting up these disease free Zones: some K80 billion has been used during 2007-2011 to start up work in a number of districts (Table 3).

18

Table : Funds Allocated to Disease Free Zones (2001 - 2011)

Year Allocation (ZMK billion)

2007 6

2008 7

2009 36

2010 8

2011 23

Total 80

3.3 Agricultural Sector Policies and Priorities

Good agricultural policies will ensure growth in the sector. Zambia has developed a National Agricultural Policy (NAP 2004 – 2015)which focuses on increased production, sector liberalization, commercialization, promotion of public and private sector partnerships and provision of effective services that will ensure sustainable agricultural growth. According to the NAP, Zambia is committed to developing and regulating an efficient, effective, demand driven and sustainable credit and rural finance system that will enhance access to financing by farmers for investments. To drive agricultural growth in the sector, Zambia has undertaken to promote the development of a competitive, efficient and transparent public and private sector driven marketing system for agricultural commodities and inputs.

Zambia is also currently implementing the Sixth National Development Plan (SNDP) which aims to attain the long-term vision for the country which is to become “a prosperous middle income nation by 2030”. According to the SNDP, some of the major development targets include promoting economic growth, reducing poverty and creating employment as well as increasing and diversifying agriculture production and productivity so as to raise the share of its contribution to the GDP.In addition, Zambia is implementing the Comprehensive Africa Agriculture Development Programme (CAADP) which is an initiative of the African Union Commission (AUC) and its New Partnership for Africa's Development(NEPAD) Planning and Coordinating Agency (NPCA) which aims at achieving and sustaining a higher path of economic growth through agriculture-led development (Zambia CAADP Compact, 2010). In Zambia, CAADP implementation seeks to build on national development plans (e.g. National Agricultural Policy, Vision 2030 and the Sixth National Development Plan).

Box 2: Agricultural Policy Environment

Due to its immense potential for development, agriculture is always seen in Zambia as the engine for economic growth. The policy environment that seems

19

to motivate the status quo for public agricultural funding in Zambia is that of ensuring a positive contribution to rural livelihoods, food security and poverty reduction. To support the policy, government has liberalized the sector where both domestic and foreign investment is being encouraged to invest and create employment, produce more affordable foods and generate stable agricultural output.

However, a well meant policy if wrongly implemented can incur high social and economic costs. In Zambia, the liberalization policy in agriculture does not seem to work well. Government’s significant interference in both the production and marketing of major agricultural commodities has continued to hurt the growth in the sector. Investments targeted at capital formation for the small holders in Zambia are unlikely to reach full potential as long as government continues to provide handouts to the famers.

3.4 Role of the NEPAD-CAADP Process in Coordinating Donor Inputs

An improved and effective aid delivery system by the development partners is key in ensuring that financial and other resources are targeted at agreed development priorities for economic growth of a country such as Zambia. To this end, Zambia working together with development partners is implementing the Joint Assistance Strategy framework for donor assistance. The Joint Assistance Strategy for Zambia (JASZ) is a national medium-term framework which Zambia has been developing in collaboration with its development partners to manage their development cooperation with the Government of the Republic of Zambia (GRZ) in alignment with the national development plans.

At the same time, one of NEPAD’s thrusts is also to increase Official Development Assistance (ODA) flows, through reforms of the ODA delivery system, that ensure that flows are more effectively utilised by recipient African countries. As a member of the African Union (AU), Zambia is pursuing NEPAD's objective of enhancing Africa's economic growth by adopting the Aid Harmonization agenda. As a result of the foregoing, much of the donor support in Zambia is now being implemented in accordance with the JASZ framework for coordinating donor inputs. Strategic alignment and a well-coordinated donor support to the agreed national development agenda is one of the strongest elements of the CAADP process in Zambia. It can therefore be said (with some level of certainty) that NEPAD and CAADP are playing an important role in ensuring that donor support and input (including resource allocations) is aligned to the country’s strategies with national development priorities, targets and country systems.

3.5 Large-Scale Land Leases (Land Grabs)

20

Initial findings suggested that the phenomenon of land grab is not very prominent or does not exist in Zambia. It appears that the responsible ministry (Ministry of Lands) has no records of such incidences in Zambia. However, the Ministry of Lands acknowledges the existence of a practice in Zambia where political cadres illegally allocate land for residential development. This practice, however, does not have direct implications on agricultural production and development. At the same time, the African Development Bank Representative in Zambia presented a Zambian case1 at the High Level Forum on Foreign Direct Investment in Land in Africa (Nairobi 4-5 October 2011), selected highlights from which are in Box 3.

Box 3: Foreign Direct Investment in Land in Zambia

• For the period 2004-2010, agriculture occupied fourth place in FDI pledges in Zambia (top being mining, manufacturing and energy in descending order);

• Initial interest of FDI was to get foreign partners for privatised state enterprises; next was arrival of Zimbabwean and South African farmers seeking land tenure security; third wave is by Europeans, Asians for agro fuels and food crops.

• ZDA records 1.18 million ha of land for biofuel investments alone;

• From ZDA data, AfDB estimates of 2005-2011 pledged foreign land investments worth over US$500,000 total US$514.2 million in value and 398,200 ha in area;

• Zambia offers investors a range of incentives related to taxation, work permit easing, capital allowances, and special incentives – this applies to land investments;

• None of the investors traced had registered their interests with the Ministry of Lands although they had ZDA investment certificates.

1Case Study on Foreign Direct Investment (FDI) in Zambia. Paper by African Development Bank Zambia for High Level Forum on Foreign Direct Investment in Land in Africa (Nairobi 4-5 October 2011). Organised by the Coalition for Dialogue on Africa (co-sponsored by the African Union, AfDB, UN-ECA).

22

4 AGRICULTURAL INVESTMENT AND OTHER FUNDING

Meaningful development in agriculture is assured to take place in countries where agricultural investment is allowed to develop and drive the growth of the sector. However, Zambia, like many countries in the region, is characterized by extended periods of under-investment in the agricultural sector. Zambia’s SNDP recognizes that low investment in the sector and low production and productivity especially among small-holder farmers are some of the serious challenges currently affecting the agricultural sector.

In terms of the opportunities for investment, Zambia has vast resource endowment including in land, labour and water (GRZ 2007). The abundant natural resources and human labour, including the current socio-economic environment, sets the ground for increased investment in the agricultural sector with positive implications on poverty reduction and agricultural growth.

An important approach to raising production and productivity is the government’s subsidy of farm inputs, specifically for maize. A profile of this activity, which takes place under the Farmer Input Support Programme (FISP) is presented first below.

4.1 Subsidies

4.1.1. A Profile of the Subsidy ProgrammeA well-implemented agro subsidy programme targeting the small scale farmers can undoubtedly improve such farmers’ access to agricultural inputs (i.e. fertilizers and improved crop seeds, etc) and thereby enhancing their potential to increase production and productivity for the supported crops. The Government’s FISP is meant “to improve crop productivity and household food security among targeted vulnerable and viable households and thereby contribute to poverty reduction”. However, the performance of the subsidy programme in Zambia has been less than expected in many aspects. It has led to a number of concerns about its implementation, especially with regard to the targeting of beneficiaries, impact on household and national food security (value for money), effect on private sector investment and participation in agricultural inputs supply markets, and the programme’s long-term sustainability, given the ever increasing competition for national resources by various sectors.

Government is therefore concerned that the input support programme has had only limited impact on agricultural productivity and therefore intends to comprehensively review the programme in order to increase its efficiency and effectiveness. As agriculture has remained a key sector in economic growth, Government intends to continue supporting increased agricultural production with focus on improved extension services, increased funding to rural infrastructure and livestock development as well as increased support to livestock disease control and irrigation projects. Table 4 shows the performance of FISP since inception.

23

Table : Performance of FISPSince Inception

Agricultural Season

Quantity of Fertlizer Distributed (MT)

Amount Spent (ZMK

Billion)

Number of Beneficiary Farmers

2002/03 48,000 100 120,000

2003/04 60,000 115 150,000

2004/05 50,000 113 125,000

2005/06 50,000 140 125,000

2006/07 84,000 252 210,000

2007/08 50,000 150 125,000

2008/09 80,000 435 200,000

2009/10 100,000 430 500,000

TOTAL 522,000 1,734 1,555,000 Source: GRZ

4.2 Selected Impacts of FISP Subsidy Programme

4.2.1 Impact on Large-Scale Commercial FarmingThe FISP is largely perceived as disadvantaging the large scale farmers in Zambia whose contribution to total maize production has been decreasing over the last few years. The cropping patterns by this category of famers are shifting to other crops where Government is not ‘interfering’ in production as well as marketing. Much of the concern of the large scale framers has been about the Government’s failure to address the perceived two-tier system of production and marketing especially as it relates to maize which can be categorized as follows:

a. Production of maize at full cost by the large scale farmers; andb. Production of maize at high subsidy levels by the small scale farmers.

The Zambian agricultural crop marketing is also considered to be a two tier system for maize where:

a. Maize marketing for the large scales farmers is left to market forces, whileb. Maize marketing for the small scales farmers is supported by Government.

In terms of production, the large scale farmers are more efficient with production of maize per unit area being higher than that for the small scale farmers. However, Government has continued to support the small scale farmers in terms of providing subsidy to support production for this category of farmers whose production per unit area has remained low over a long period. The subsidy support to the small scale farmers is such that Government delivers at a nearest point to the farmers and provides inputs such as fertilizers and seed at reduced cost while the large scales farmers have continued to produce the same maize at a full market cost of inputs including transport and other related production costs. This type of heavily skewed

24

support to only one type of farmers (the small-scale farmers) for the same crop is what is widely considered to disadvantage the large scale famers in Zambia.

There are also uneven approaches with regard to markets and marketing. In a liberalized market (which Zambia aspires to), one expects the main role of government to be putting in place an enabling environment which will encourage the private sector to fully participate in agricultural marketing including that of maize. This should include providing a policy and legal environment that is conducive to such private sector engagement. Government should also invest in public goods such as access road and storage infrastructure, especially in rural areas. If incentives are offered at all, then they should also be offered to the commercial private sector to encourage it to participate in crop marketing, particularly in outlying areas.

Instead, crop marketing in Zambia, especially for maize, is also favoring the small scale farmers. Government through the Food Reserve Agency has been heavily involved in maize marketing. The FRA has largely remained the main player in the Zambia’s agricultural marketing with other market players being involved in a less significant way. When the crop/maize marketing starts, FRA heavily enters the market by buying maize from the small scale farmers across the country at a set floor price which is usually higher than the market price for the commodity. The large scale farmers, who do not qualify to sell to FRA, are expected to find their own market for the crop and hence do not benefit from the available market offered by FRA. Due to limitations for the other players in the maize marketing to reach the economically disadvantaged remote areas, FRA also sells the maize to the processors such as the millers. The large scale farmers are also expected to sell their produce to the same local market by selling at competitive prices; however they cannot easily compete when FRA enters the same market at lower than their cost price and at prices lower than what FRA bought from the small scale farmers.

For instance, during the 2011/2012 marketing season, FRA bought maize at a farm-gate price from the small scale farmers at US $ 260 per metric ton but was selling the same maize to the millers at prices as low as US $ 140-160 per metric ton. As far as the large scale farmers are concerned, the latter prices are below the economic level for the commodity. This distortion in the market heavily disadvantages the large scale farmers and as a result they are reducing their involvement in the production of maize as evident their reduced output and area planted to maize over the last few years.

4.2.2 Impact on the National EconomyThe subsidy programme under FISP is aimed and improving rural livelihoods and reducing poverty among households. More than 90percent of GRZ funding for Poverty Reduction Programmes is devoted to the FRA and FISP, yet there has been no major reduction in rural poverty rates in Zambia since 2004 (Nicole M. Mason et al. 2011). The fact that rural poverty levels are still high indicates that there are, at best, poor returns on the investment for such programmes. Finances for such investment can be channeled to programmes with high returns for growth and poverty reduction such as in research, irrigation and feeder road development as well as health and educational programmes.

One weakness must arise from government appearing to discourage private sector participation in maize marketing – it has tended to crowd out such private sector participation by getting fully involved in the market, thereby reducing the opportunity for job and wealth creation. Another weakness is that targeting of only one crop for

25

subsidy is leading farmers to use unsustainable agricultural practices (such as mono cropping) that do not help in preserving and conserving the natural resources but cause damage to the environment and land. At the same time, the small scale farmers do not see the value in growing high-value crops, thanks to the FISP which seems to support this by paying the farmers premium prices for their maize produce.

The FISP has also created a dependency syndrome by the small scale farmers on government support with no innovation for improved production in other crops. The FISP initiative seems to be benefiting the inefficient producers (the small scale famers) while the large scale farmers are not rewarded for their efficiency. Overall, the FISP has only gone as far as creating an inefficient production and marketing system that is leading to reduced participation by the large scale farmers and the private sector in the maize sub-sector.

4.3 Gross Fixed Capital Formation in Agriculture

Fixed capital formation is an important measure for investment that can be used to gauge economic development for any country. Estimating capital formation for Zambia is, as with other countries, almost impossible to do accurately. Disaggregating capital fixed formation between economic sectors of a country such as agriculture, mining, etc, is an even more daunting task. According to the Central Statistical Office, Zambia’s gross fixed capital formation is not disaggregated by any economic sector but is estimated at national level using indicators such as imports of machinery and the level of construction (using cement sales as an output indicator). Therefore, data on gross fixed capital formation is only available in aggregate values without being disaggregated at sector level such as agriculture. Table 5 is an extract from the national accounts indicating the level of fixed capital formation in Zambia in billions of Kwacha from 2003 to 2010.

What follows is the estimation capital formation by the different economic agents in the agricultural sector including the small scale farmers.

4.4 Public Budget Allocation and Expenditure

The amounts of public resources allocated and approved for spending to the agricultural sector compared to the national totals each year since 2005 are shown in Table 6 below. Public funding in Zambia includes Government funds as well as funds from the Development Partners which come in form of direct budget support to Government. The amounts cover all allocations to the Ministry of Agriculture and agricultural sector programmes implemented through other ministries and departments. A review of the findings indicates that Zambia has performed well in the allocation of the public resources to the agricultural sector. Trends in both real and nominal values reveal that the size of the budget allocated to the agricultural sector has been increasing between 2005 and 2009. In real terms, the public allocation to the sector has increased by70 percent from 2005 to 2009 while the increase has been by 173 percent in nominal terms during the same period.

26

Table : Fixed Capital Formation in Zambia (ZMK’ billions)

YearGross Capital Formation

Gross Fixed Capital

FormationMachinery and

equipment ConstructionChanges in inventories

2003 5,238.2 4,968.2 3,825.8 1,142.4 270.0

2004 6,474.5 6,141.7 4,473.8 1,667.9 332.7

2005 7,585.1 7,175.0 4,864.2 2,310.8 410.0

2006 8,525.8 8,020.5 4,641.2 3,379.3 505.3

2007 10,753.0 10,130.3 4,720.9 5,409.4 622.7

2008 13,060.7 12,293.4 4,380.2 7,913.1 767.3

2009 15,682.6 14,737.0 4,122.4 10,614.6 945.6

2010 20,698.6 19,533.4 5,423.4 14,109.9 1,165.2

Table : Budget Allocation at National Level Compared to the Agriculture Sector

Year

Total National Budget

(Nominal)

Allocation to Agriculture (Nominal)

Total National Budget (Real)

Allocation to Agriculture

(Real)Share of Agriculture

Allocation (Real) %

2005 8,813 464 14,146 745 5.002006 10,237 651 13,887 883 5.982007 12,042 1,086 14,984 1,351 8.272008 13,761 1,475 15,474 1,659 9.682009 15,279 1,266 15,279 1,266 7.65

Values are normalized using the 2009 inflation rate (i.e. 2009 = 100)

(….billion kwacha) (….billion kwacha)

27

Figure : Nominal Allocation to Agriculture Compared to Real Allocation

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005 2006 2007 2008 2009 2010

ZMK' Billion

Nominal Allocation to Agriculture Real Allocation to Agriculture

4.5 Trends in Public Sector Agricultural Funding

Trends in the share of public resources allocated to agriculture rose in real terms from 5.0percent in 2005 to 7.65percent in 2009. Inasmuch as the share of agriculture funding has been rising during the period, it has remained below the 10percent CAADP target. Public expenditure in agriculture has remained skewed towards non-core agriculture programmes such as the Fertilizer Support Programme and the Food Reserve Agency, which together account for between 50-70percent of the total agriculture allocation during the period. Important investment areas in agriculture such as research and development, extension services, rural infrastructure, and food safety and quality have remained poorly funded.

Public budget flows into fixed capital formation have remained relatively insignificant during the period. On the contrary, public investments in consumable inputs such as goods and service as well as subsidies and social benefits account for a large proportion of the share of public expenditure in agriculture, see Table 7.

This pattern in funding suggests that there is poor quality delivery of public funds to the agricultural sector. Figure 5 shows the average share of public capital investment in to the crops sub-sector in relation to other input costs from 2005 to 2010. On average, only about 1percent of the total public funding to the crops sub-sector is spent on capital investment during the review period.

28

Table : Public Allocations to the Crops Sub-Sector in Zambian Kwacha (2004 – 2010)

YearPersonnel

EmolumentGoods and Services

Capital Allocation

Subsisidies Grants and

Social Other Total

2004 47.78 135.17 14.20 5.71 - 202.86

2005 15.05 217.80 8.90 2.35 - 244.11

2006 17.10 33.25 - 234.61 5.71 290.67

2007 23.64 45.83 - 353.57 18.96 442.00

2008 23.65 210.61 - 82.55 13.17 329.98

2009 27.99 38.31 - 529.23 14.53 610.06

2010 24.52 559.36 - 2.36 2.78 589.02 Source: GRZ

Figure : Average Apportionment of Public Investment in Crops Sub-Sector, 2004-2010

Personnel Emolument

6%

Goods and Services

46%

Capital Allocation

1%

Subsisidies Grants and

Social Benefits

45%

Other2%

4.6 Motivations/Driving Forces for Public Funding

The two major likely factors contributing to the current structure of public funding, allocations and disbursement to the agriculture sector are i) the limited financial resources which could be used to support capital formation in agriculture and ii) the desire by Government to continue playing a role in agricultural production and marketing.

Government has continued to support and finance competing needs in different sectors of the economy, exerting pressure on the national treasury. Government

29

resources will not be sufficient as the sole source of investment in agriculture. If Government has to tackle the growing need of alleviating poverty and reducing hunger, it has to be prudent in its allocation of public resources that are aimed at economic growth and should prioritize those investments that will bring about higher returns. Government’s continued involved in the sector is largely motivated by the desire to support the rural poor in meeting their rising need for food and other requirements and to reduce poverty and hunger among the rural population.

4.7 Large Private Agriculture Investment

The definition of the large scale players in the sector could include private sector companies engaged in agriculture as well as the large scale farmers. Pledged domestic private sector spending on agriculture as well as inward foreign direct investment (FDI) flowing to the agriculture sector is shown in Table 8. The figures show that FDI has on average been increasing over the period in contrast to local investment, which has been both low and erratic during the same period. According to the Zambia Development Agency (ZDA), information on local investors in agriculture is obtained from the established and large agro-businesses who are able to provide the required information to the agency. The blanks in Table 8, therefore, mean that the large agro-businesses either did not invest in the sector in the respective years or information is not available.

A review of the type of ventures in the sector between 2005 and 2010shows that most of the investment (by both the international and local investors in agriculture) concentrates on in the area of crop production. Poultry rearing is also gaining some significance as an important area of investment in agriculture. A proxy for estimating large-scale farmers’ investment was derived from the values of local investment in Table 8. However, as can be seen from the table, estimating this was difficult due to poor availability of the data.

Table : Investment Pledges in Agriculture (US $' Million), 2005 - 2010

Year FDIs Domestic

2005 31,455,227 730,891

2006 60,908,995 -

2007 63,301,687 -

2008 46,027,671 10,000,000

2009 308,626,470 2,900,888

2010 194,000,000 - Source: ZDA

4.8 Fixed Capital Formation by Small-Scale Famers

Fixed capital formation in agriculture is necessary to generate sustained growth and reduce poverty especially for the rural poor. Capital formation in agriculture is increasingly becoming important in supporting and improving rural livelihoods in Zambia as it provides a strong base for growth in the sector.

30

To estimate fixed capital formation by the small-scale famers in Zambia, this study made use of the Supplemental Surveys (SSs) for the years 2004 and 2008 which are conducted by the Indaba Agricultural Policy Research Institute (IAPRI), a research institute in Zambia. The SS is based on the Post Harvest Survey (PHS) of 1999/2000 agricultural season. The PHS collects nationally representative household-level data and is conducted annually by the Central Statistical Office (CSO) in conjunction with the Ministry of Agriculture and Cooperatives (MACO) in Zambia. This survey is one of the most important sources of data in Zambia for estimating annual production outputs for crops and livestock as well as providing statistics on socio-economic characteristics of agricultural households. The PHS of 1999/2000 surveyed about7,500 households countrywide. The SS was first conducted in 2001 and covered the same reference period as the PHS of 1999/2000, targeting the same households but collected additional information on non-farm income, and basic socio-economic information as well as information on assets owned by the households.

According to IAPRI, because of missing information on some households, the valid sample in 2001 was reduced to 6,922 households. The 6,922 households surveyed in SS 2001 were revisited in 2004 and 5,420households were successfully re-interviewed. In 2008, the same households were revisited and 4,284 households were successfully re-interviewed. Sampling considerations are explained in Box 4.

Box 4: Sampling Considerations in Surveys

It may be necessary to understand how the PHS data is obtained and the methodology used for data collection. Sikombe (2009) describes some elements of the methodology of the PHS as follows: To select a household in the PHS, a sample of Standard Enumeration Areas (SEAs) is drawn using a probability proportional to the size sampling scheme. The number of households located within each SEA determines the size of the SEAs. The area-sampling frame employed is as per the 1990 Census of Population, Housing and Agriculture. Each sampled SEA has a list of households from which farming holdings are selected. There about 150-200 households in a SEA. The selection of farming holdings takes consideration of the categories of farmers based on land area and livestock. For example, a household cultivating less than two hectares of land will be in a different category from a household that is cultivating two hectares and above but less than twenty hectares. Those cultivating above twenty hectares will be yet in another category. The number of livestock owned by the households also determines which category a farmer belongs to. For detailed sampling procedures of the PHS, see Megill, 2004.

The use of the SS Survey data was preferred to a self-designed-and-administered survey because it has the advantage that it is large and is nationally representative and collects panel data for the years 2001, 2004 and 2008. The sampled data is weighted up to national level, meaning that the estimates represent all the small and medium scale farmers in Zambia that were engaged in agricultural in 2001, 2004 and

31

2008. The SS data on assets was, however, not available for 2001 at the time of this study and hence only data for two years (2004 and 2008) was used for this study.

4.8.1Number of Households Owning Agricultural AssetsIt is widely believed that a large number of rural agricultural households in Zambia do not use or have access to significant fixed agricultural assets or implements. Fixed capital formation in agriculture is also understood to be very low and concentrated on commercial farms.

Using the SS data, the number of small-scale farm households owning agricultural assets in 2004 and 2008 was estimated. The assets under study include Ox-drawn ploughs, disc ploughs, harrows, cultivators¸ rippers, tractors, hand driven tractors, scotch carts, water pumps, trucks/lorries, pick-ups/vans/cars, trailer trucks and motorcycles. Other assets considered are bicycles, hammer mills, hand hammer mills, rump pressers/oil expellers, sprayers and shellers.

Since fixed capital formation by the small scale farmers may be concentrated in a few regions/provinces of the country, disaggregated analysis was necessary to understand the spread of fixed capital formation across the country. Using the SS data, the number of assets owned by small-scale farm households in 2004 was estimated. The results in Table 8 show that there were a total of 1,206,689 households in 2004 that reported to own at least one kind of an agricultural asset. During the year, the number of households owning bicycles was the highest with 615,288 households reported to own bicycles. This was followed by an estimated 222,335 households that reported to own ox-drawn ploughs. The number of households owning sprayers followed at 97,546. The results in Table 8below also show that a relatively smaller number of households were reported owning assets such as shellers, oil expellers, tractors, trailers, rippers, lorries, pick up vans and cars. Table 9 shows the number of agricultural households owning assets by province in 2004.

32

Table : Number of Households Owning Assets by Province, 2004 - Weighted Estimates

Asset/Province Central Copperbelt Eastern Luapula Lusaka Northern Nwestern Southern Western Total

Ox-drawn ploughs 33,234 2,935 54,704 - 6,453 3,926 2,998 81,816 36,290 222,355

Disc ploughs 2,633 120 2,928 - 403 659 235 5,286 318 12,582

Harrows 15,151 914 828 - 3,960 25 70 30,589 1,579 53,117

Cultivators 9,637 826 805 - 818 25 235 23,386 - 35,732

Rippers 2,043 282 211 - 593 25 - 4,480 - 7,633

Tractors 1,270 247 377 - 219 - - 797 - 2,910

Hand driven tractors 59 - - - - - 43 191 - 293

Scotch carts 15,571 2,046 29,695 - 3,601 1,395 3,517 30,708 5,700 92,234

Water pumps 3,629 1,188 1,227 217 1,904 - - 1,527 37 9,729

Trucks / lorries 1,251 76 66 232 45 - - 95 - 1,765

Pick-ups / vans / cars 888 180 1,387 153 1,087 701 383 3,178 328 8,285

Trailer truck / tractor 438 159 403 - 60 - - 314 - 1,374

Motorcycles 2,225 557 4,706 2,060 422 1,178 306 1,794 - 13,248

Bicycles 86,518 41,943 141,657 54,340 14,053 117,537 54,554 83,978 20,707 615,288

Hammer mills 241 968 1,988 1,099 904 1,306 524 3,308 78 10,418

Hand hammer mills 1,056 148 - - 237 79 - 15,800 203 17,523

Rump presses / oil expellers 1,269 - 612 491 - 45 - 1,046 - 3,463

Sprayers 23,466 5,634 35,506 613 5,024 3,029 1,700 21,627 947 97,546

Shellers 84 - 493 - 150 363 - 105 - 1,196 All Assets 200,663 58,223 277,593 59,205 39,934 130,293 64,567 310,025 66,187 1,206,689

33

At provincial level, the number of households owning assets in 2004 was highest in Southern Province, where 310,025 households were reported to own at least one kind of an agricultural asset, followed by Eastern Province which recorded 277,593 households and Central Province at 200,663. These three provinces are also Zambia’s highest producing areas of major crops such as maize and sorghum. Lusaka Province recorded the lowest number of households owning agricultural assets at 39,934.Figure 6 shows the share, in percentage terms, of the number of households owning agricultural assets by province in 2004.

Figure : Share of the Number of Households Owning Assets by Province, 2004

Central18% Copperbelt

5%

Eastern24%

Luapula5%

Lusaka4%

Northern11%

Nwestern6%

Southern27%

Figure : Share of the Number of Households Owning Assets by Province, 2008


6%

Eastern25%

Luapula8%

Lusaka3%

Northern13%

Nwestern6%

Southern21%

Western4%

34

In 2008, the dynamics seemed to have changed slightly with Eastern Province now recording the highest number of households owning agricultural assets (311,714), followed by Southern Province (266,362) and Central Province (175,579). As was the case in 2004, these three provinces, Eastern, Southern and Central recorded the highest number of households owning agricultural assets in 2008 as shown in Table 9.Figure 7 shows the share, in percentage terms, of the number of households owning agricultural assets by province in 2008.

In 2008, households owning bicycles were the most numerous, with 698,105 households reporting to own bicycles, followed by the number of households owning ox-drawn ploughs (184,389) and those owning sprayers (122,810). The ownership of hand-driven tractors was reported by the lowest number of households in 2008 at 719.

Table : Number of Households Owning Assets by Province, 2008 - Weighted Estimates

Asset/Province Central Copperbelt Eastern Luapula Lusaka Northern Nwestern Southern Western Total

Ox-drawn ploughs 26,274 1,018 55,531 225 4,742 3,053 1,371 69,988 22,187 184,389

Disc ploughs 3,713 212 625 - 663 236 40 585 120 6,195

Harrows 9,791 347 609 - 2,422 157 - 22,814 1,400 37,539

Cultivators 9,569 122 2,013 - 2,140 22 - 19,783 162 33,811

Rippers 3,340 - 2,742 - 883 157 - 4,148 170 11,440

Tractors 1,329 112 170 - 415 - - 589 - 2,615

Hand driven tractors 83 384 206 - - 46 - - - 719

Scotch carts 13,424 578 28,725 30 1,917 943 1,774 25,872 5,375 78,637

Water pumps 2,468 1,082 1,225 124 711 - 167 1,508 139 7,423

Trucks / lorries 1,073 24 17 - 114 193 17 1,335 - 2,772

Pick-ups / vans / cars 2,002 405 2,078 - 1,265 487 366 2,304 309 9,217

Trailer truck / tractor 470 - 36 119 168 - - 168 - 960

Motorcycles 1,382 1,112 1,760 448 280 2,085 1,921 1,696 878 11,561

Bicycles 77,393 51,288 153,952 96,167 15,424 148,968 62,827 73,730 18,356 698,105

Hammer mills 2,348 1,046 3,627 580 220 2,010 2,916 1,079 655 14,480

Hand hammer mills 48 - 463 - 39 1,309 - 13,819 326 16,004

Rump presses / oil expellers 116 56 954 - - 29 - 537 189 1,880

Sprayers 20,378 10,434 56,479 774 3,795 1 2,721 25,769 2,459 122,810

Shellers 380 - 501 - 124 29 - 638 - 1,671

All Assets 175,579 68,218 311,714 98,466 35,321 159,725 74,119 266,362 52,724 1,242,228

4.8.2Number of Agricultural Assets Owned by Households

An estimate of the number of agricultural assets owned by small-scale farm households across Zambia show that a total of 1,451,113 assets were owned by households in 2004. The distribution, by province, of the number of agricultural assets owned by the households was also estimated. The results show that Southern Province recorded the highest number of assets owned (376, 763), followed by Eastern Province (348,198) and Central Province (241,293). Lusaka Province recorded the least number of assets owned (43,557).

35

The results in Table 10 show the number of assets owned by province in 2004.Bicycles were the most dominant owned assets by the small-scale farm households in 2004 (725,750), followed by Ox-drawn ploughs (319,253) and sprayers (115,512). The least number of assets owned in 2004 was hand-driven tractors which stood at an estimated total of 289.Figure 8 shows the share, in percentage terms, of the number of agriculture assets owned by province in 2004.

Figure : Share of the Number of Agriculture Assets Owned By Province, 2004


5%

Eastern24%

Luapula5%

Lusaka3%

Northern10%

Nwestern5%

Southern26%

Western5%

36

Table : Number of Assets Owned by Province, 2004Asset/Province Central Copperbelt Eastern Luapula Lusaka Northern Nwestern Southern Western Total

Ox-drawn ploughs 49,457 4,662 80,440 - 7,934 4,869 4,108 122,137 45,626 319,233

Disc ploughs 4,451 120 3,519 - 298 659 235 5,875 712 15,868

Harrows 16,410 1,382 828 - 4,490 25 70 32,743 2,032 57,981

Cultivators 10,022 826 1,225 - 818 25 471 26,000 - 39,386

Rippers 2,038 282 222 - 540 25 - 4,833 - 7,940

Tractors 1,424 247 377 - 219 - - 793 - 3,059


Scotch carts 14,192 2,433 33,712 - 3,416 1,395 3,474 32,912 5,288 96,822

Water pumps 4,278 1,463 1,460 217 2,539 - - 1,374 - 11,331

Trucks / lorries 1,251 76 66 232 - - - 152 - 1,778

Pick-ups / vans / cars 848 263 1,421 153 843 893 383 3,106 328 8,237

Trailer truck / tractor 438 159 403 - 60 - - 381 - 1,441

Motorcycles 2,089 557 5,133 2,060 422 918 306 1,539 - 13,023

Bicycles 102,500 56,274 172,377 59,243 15,847 132,188 65,381 99,812 22,128 725,750

Hammer mills 241 968 2,255 867 904 1,085 454 2,895 284 9,954

Hand hammer mills 1,056 148 - - 237 79 - 16,198 203 17,921

Rump presses / oil expellers 1,830 - 612 491 - 45 - 1,332 - 4,310

Sprayers 28,499 6,275 43,657 613 4,882 3,588 2,467 24,388 1,143 115,512

Shellers 211 - 493 - 106 363 - 105 - 1,278

All Assets 241,293 76,134 348,198 63,877 43,557 146,155 77,393 376,763 77,743 1,451,113

The results in Table 11 show that in 2008 an estimated total of 1,517,536 assets were owned by agricultural household across the country. Eastern Province recorded the highest number of assets owned (381,826), followed by Southern Province (328,038) and Central Province (230, 878). Lusaka Province, again, recorded the lowest number of assets owned by agricultural households with an estimated total of 42,496 assets owned. Bicycles in Eastern Province (186,168), Ox-drawn ploughs in Southern Province (110,588), sprayers in Eastern Province (67,553) were among the highest number of assets owned in 2008.Figure 9 shows the share, in percentage terms, of the number of agriculture assets owned by province in 2008.

37

Table : Number of Assets Owned by Province, 2008 - Weighted EstimatesAsset/Province Central Copperbelt Eastern Luapula Lusaka Northern Nwestern Southern Western Total

Ox-drawn ploughs 39,330 2,082 79,210 449 6,991 3,427 1,809 110,588 26,683 270,569

Disc ploughs 4,816 392 718 . 679 297 40 537 120 7,598

Harrows 11,846 413 609 . 2,875 157 . 24,437 1,560 41,897

Cultivators 10,717 289 2,353 . 2,363 22 . 23,448 162 39,353

Rippers 3,489 . 3,027 . 883 157 . 4,150 309 12,015

Tractors 1,645 112 - . 387 . . 561 . 2,706

Hand driven tractors 83 11 206 . . - . . . 301

Scotch carts 14,147 578 30,193 30 2,037 921 1,822 26,169 5,959 81,856

Water pumps 2,774 1,063 2,002 124 711 . 167 1,797 139 8,778

Trucks / lorries 1,263 24 9 . 114 193 17 1,477 . 3,096

Pick-ups / vans / cars 2,299 767 1,908 . 1,718 546 406 2,286 309 10,240

Trailer truck / tractor 546 . 28 119 168 . . 406 . 1,266

Motorcycles 2,536 971 1,633 592 437 2,643 2,155 1,834 878 13,679

Bicycles 102,583 63,660 186,168 110,808 18,724 175,929 77,895 86,150 18,956 840,873

Hammer mills 3,103 970 4,103 580 220 1,982 2,963 1,105 686 15,713

Hand hammer mills 36 . 463 . 39 1,752 . 13,161 326 15,776

Rump presses / oil expellers 116 56 1,142 . . 29 . 537 189 2,068

Sprayers 29,168 11,542 67,553 774 4,028 622 2,832 28,758 2,803 148,081

Shellers 380 . 501 . 124 29 . 638 . 1,671

All Assets 230,878 82,930 381,826 113,477 42,496 188,707 90,106 328,038 59,079 1,517,536

Figure : Share of the Number of Agriculture Assets Owned by Province, 2008


5%

Eastern25%

Luapula8%

Lusaka3%

Northern12%

Nwestern6%

Southern22%

Western4%

38

4.8.3Value of Agricultural Assets Owned by HouseholdsThe value of assets owned by small-scale farm households in Zambia was also estimated. The results in Table 12 show that the value of all assets owned by agricultural households in 2004 was estimated at ZMK 609,360 billion. Out of this amount, the value of bicycles was the highest, accounting for an estimated ZMK 136,969 billion. This was followed by pick-ups, vans and cars that accounted for ZMK 109,920 billion and Ox-drawn ploughs with a share of ZMK 76,108 billion. The value of hand-driven tractors was the lowest, accounting for ZMK 336 billion of the total asset value in 2004.

The value of the assets owned by agricultural households in 2004 was highest in Southern Province and was estimated at ZMK 148,873 billion. This was followed by Eastern Province (ZMK 148,518 billion), and Central Province (ZMK 125, 781). Luapula Province recorded the lowest value of assets owned at ZMK 13,535 billion. Figure 10 shows the share, in percentage terms, of the value of agriculture assets by province in 2004.

In 2004, the total value of assets owned by agricultural households across Zambia was estimated at ZMK 911,299 billion as shown in Table 13. Values for 2008 are in Table 14: pick-ups, vans and cars accounted for the largest value of the assets in 2008 which was estimated at ZMK 192,117 billion. This was followed by the value of bicycles estimated at ZMK 168,059 billion and that of scotch carts, estimated at ZMK 92,406 billion. Hand-driven tractors had the lowest value in 2008 and were estimated at ZMK 255 billion.

Table : Value of Assets Owned by Province, 2004 - (ZMK' Million)Asset/Province Central Copperbelt Eastern Luapula Lusaka Northern Nwestern Southern Western Total

Ox-drawn ploughs 14,853 943 22,125 - 1,596 1,988 1,343 21,793 11,467 76,108

Disc ploughs 6,927 600 1,064 - 111 301 24 2,604 205 11,836

Harrows 3,226 278 249 - 1,267 1 8 5,523 399 10,951

Cultivators 2,315 221 480 - 229 5 35 5,633 - 8,918

Rippers 318 99 79 - 94 5 - 700 - 1,295

Tractors 18,368 5,334 7,537 - 2,860 - - 10,583 - 44,682


Scotch carts 7,962 834 29,041 - 1,752 1,206 3,028 20,620 4,949 69,391

Water pumps 8,903 2,296 1,457 39 4,284 - - 1,320 - 18,300

Trucks / lorries 26,384 759 2,216 927 - - - 6,224 - 36,510

Pick-ups / vans / cars 10,721 2,516 17,187 306 10,819 17,128 13,422 34,544 3,278 109,920

Trailer truck / tractor 955 477 3,176 - 318 - - 448 - 5,374

Motorcycles 1,157 1,393 2,241 333 1,319 1,233 164 2,860 - 10,699

Bicycles 17,772 9,754 36,188 11,235 2,249 23,712 12,023 19,502 4,532 136,969

Hammer mills 1,457 5,835 16,762 450 4,728 2,799 2,410 7,172 1,022 42,635

Hand hammer mills 158 3 - - 71 10 - 4,331 101 4,676

Rump presses / oil expellers 331 - 429 218 - 45 - 434 - 1,456

Sprayers 3,895 1,176 8,009 28 815 352 388 4,222 56 18,940

Shellers 61 - 81 - 32 65 - 126 - 364

All Assets 125,781 32,518 148,317 13,535 32,544 48,850 32,932 148,873 26,010 609,360

39

Figure : Share of the Value of Agricultural Assets by Province, 2004

Central21%

Copperbelt5%

Eastern24%

Luapula2%

Lusaka5%

Northern8%

Nwestern6%

Southern25%

Western4%

Figure : Share of the value of agriculture assets by province, 2008

Central24%

Copperbelt5%

Eastern19%

Luapula3%

Lusaka7%

Northern7%

Nwestern4%

Southern26%

Western5%

40

Figure : Number of Households Owning Assets, 2004-2008

The distribution of the value of assets owned by agricultural assets was also estimated by province. The results show that the highest value of assets in 2008 was recorded in Southern Province (ZMK 236,694) billion), followed by Central Province (ZMK 219,941billion) and Eastern Province (ZMK 170,744 billion). Luapula Province, yet again, recorded the lowest value of assets owned in 2008 at ZMK 13,535 billion. Figure 11 shows the share, in percentage terms, of the value of agriculture assets by province in 2008.

Table : Value of Assets Owned by Province, 2008 - (ZMK' Million)Asset/Province Central Copperbelt Eastern Luapula Lusaka Northern Nwestern Southern Western Total

Ox-drawn ploughs 11,295 783 24,965 449 2,316 1,005 1,015 30,197 8,608 80,633

Disc ploughs 1,928 239 606 - 847 192 100 3,695 12 7,618

Harrows 4,091 154 251 - 1,179 31 - 6,639 559 12,904

Cultivators 4,116 157 848 - 996 4 - 6,644 97 12,863

Rippers 761 - 736 - 784 63 - 1,005 26 3,375

Tractors 48,038 2,628 - - 13,885 - - 8,541 - 73,092

Hand driven tractors 68 17 170 - - - - - - 255

Scotch carts 12,160 286 35,082 9 1,891 712 1,919 31,588 8,758 92,406

Water pumps 3,632 2,610 1,957 50 2,291 - 134 3,737 139 14,549

Trucks / lorries 32,616 402 519 - 3,116 6,902 1,496 47,180 - 92,232

Pick-ups / vans / cars 47,136 16,287 34,716 - 26,979 6,460 5,847 44,431 10,261 192,117

Trailer truck / tractor 3,888 - 696 237 1,084 - - 9,186 - 15,093

Motorcycles 904 1,058 4,365 138 113 2,334 1,725 2,901 5,290 18,826

Bicycles 20,360 12,443 35,678 23,163 3,595 33,536 17,120 17,862 4,303 168,059

Hammer mills 24,145 9,791 15,996 4,860 889 15,059 6,981 10,957 2,105 90,782

Hand hammer mills 13 - 3,323 - 12 196 - 6,610 1,110 11,264

Rump presses / oil expellers 80 20 608 - - 13 - 291 57 1,069

Sprayers 4,436 2,385 10,180 85 564 56 510 5,016 352 23,585

Shellers 274 - 47 - 37 4 - 214 - 576

All Assets 219,941 49,259 170,744 28,991 60,578 66,567 36,847 236,694 41,676 911,299

42

A comparison of the progression of the number of households owning assets, the number of assets owned and the values of assets owned from 2004 to 2008 was performed. Weighted estimates show that, overall, the number of small-scale farm households owning assets in Zambia rose from 1,206,689 to 1,243,133, an increase of 3 percent between 2004 and 2008. As shown in Table 14, the rise in the number of households owning assets was especially steep in hand driven tractors (146percent), trucks/lorries (57percent), rippers (50percent), shellers (40percent) and hammer mills (39percent). Other increases were recorded in sprayers (27percent), bicycles (13percent) and pick-ups/vans/cars (11percent).

Decreases in the number of households owning assets were also recorded. Sharp decreases were recorded in the number of households owning disc ploughs (-51 percent), rump pressers/oil expellers (-46percent), trailer trucks (-30percent), harrows (-29percent), water pumps (-24percent) and Ox-drawn ploughs (-17percent). Other decreases were also recorded in the number of households owning scotch carts (-15 percent), motorcycles (-13percent), tractors (-10percent), hand hammer mills (-9percent) and cultivators (-5percent).

During the same period, from 2004 to 2008, the number of assets owned by small-scale farm households across the country also increased from 1,451,113 to 1,517,536 representing an overall growth of 5 percent. Trucks and Lories recorded the highest increase of 74 percent followed by hammer mills (58percent), rippers (51percent), shellers (31percent), sprayers (28percent), pickup, vans and cars (24percent), bicycles (16percent), motorcycles (5percent) and hand driven tractors (4percent). Decreases were, however, recorded in the number of disc ploughs, rump presses, and oil expellers owned (-52percent). Harrows reduced by 28 percent while water pumps reduced by 23 percent. Ox-drawn ploughs and scotch carts both reduced by 15 percent. Hand hammer mills, trailer trucks and tractors registered the lowest reduction of 12 percent during the same period.

Overall, the value of assets owned by small-scale farm households in Zambia rose by an estimated 50 percent from ZMK609,360 billion in 2004 to ZMK911,299 billion in 2008. This increase can largely be attributed to the growth in the value of assets for trailer trucks and tractors, rippers, trucks and lorries, hand hammer mills and hammer mills which recorded significant increases of 181percent, 161percent, 153percent, 141percent and 113percent respectively during the same period. Decreases in the value of the value of assets such as disc ploughs (-36percent), rump pressers and oil expellers (-27percent), hand-driven tractors (-24percent) slowed down the overall growth in the value of the assets. Figure 12 shows the number of households owning selected assets in 2004 compared to 2008.

43

Table : Number of Households Owning Assets, Number of Assets Owned and Value of Assets Owned (ZMK' Million)

Asset/Year 2004 2008Percentage

Change 2004 2008Percentage

Change 2004 2008Percentage

Change

Ox-drawn ploughs 222,355 184,389 -17% 319,233 270,569 -15% 76,108 80,633 6%

Disc ploughs 12,582 6,195 -51% 15,868 7,598 -52% 11,836 7,618 -36%

Harrows 53,117 37,539 -29% 57,981 41,897 -28% 10,951 12,904 18%

Cultivators 35,732 33,811 -5% 39,386 39,353 0% 8,918 12,863 44%

Rippers 7,633 11,440 50% 7,940 12,015 51% 1,295 3,375 161%

Tractors 2,910 2,615 -10% 3,059 2,706 -12% 44,682 73,092 64%

Hand driven tractors 293 719 146% 289 301 4% 336 255 -24%

Scotch carts 92,234 78,637 -15% 96,822 81,856 -15% 69,391 92,406 33%

Water pumps 9,729 7,423 -24% 11,331 8,778 -23% 18,300 14,549 -20%

Trucks / lorries 1,765 2,772 57% 1,778 3,096 74% 36,510 92,232 153%

Pick-ups / vans / cars 8,285 9,217 11% 8,237 10,240 24% 109,920 192,117 75%

Trailer truck / tractor 1,374 960 -30% 1,441 1,266 -12% 5,374 15,093 181%

Motorcycles 13,248 11,561 -13% 13,023 13,679 5% 10,699 18,826 76%

Bicycles 615,288 698,105 13% 725,750 840,873 16% 136,969 168,059 23%

Hammer mills 10,418 14,480 39% 9,954 15,713 58% 42,635 90,782 113%

Hand hammer mills 17,523 16,004 -9% 17,921 15,776 -12% 4,676 11,264 141%

Rump presses / oil expellers 3,463 1,880 -46% 4,310 2,068 -52% 1,456 1,069 -27%

Sprayers 97,546 123,715 27% 115,512 148,081 28% 18,940 23,585 25%

Shellers 1,196 1,671 40% 1,278 1,671 31% 364 576 58%

Totals 1,206,689 1,243,133 3% 1,451,113 1,517,536 5% 609,360 911,299 50%

Number of households owning assets Number of assets owned Value of assets owned (ZMK' Million)

4.9 Fixed Capital Formation by the Commercial Famers

Estimating fixed capital formation by the commercial famers was not straightforward. Data for a few large scale farms (but all from one Group of Companies) was used to assess capital formation by this category of farmers. Using the total purchase price (without discounting for depreciation) of various agricultural assets for each of the years from 2007 to 2010 as a proxy measure for this group of farmers, an estimate of capital formation was arrived at. Since the assets that were purchased from year to year were not exactly the same from the previous year, a realistic analysis was to use a cumulative approach. Figure 13 suggests that the rate of increase of capital formation slowed down from 2008 to 2009 but sharply increased from 2009 to 2010.

44

Figure : Cumulative Value of Assets by the Large Scale Farms

-

20

40

60

80

100

120

2007 2008 2009 2010

ZMK'Billion

Year

Table 16 shows the value of assets by year from 2007 to 2010, without taking depreciation into account.

Table : Value of Assets from 2007 to 2010

Year Actual ValueAccumulated

Value

2007 33 33

2008 29 62

2009 8 70

2010 41 111

ZMK"Billion

.

4.10 Capital Formation by Rural Households

There is also evidence of capital formation by the rural communities beyond those engaged in agriculture. The choices of investment for rural communities are presented in the following tables below which are based on the Zambia’s Living Conditions Monitoring Survey of 2010 which include infrastructure such as residential and non-residential buildings. The Living Conditions Monitoring Survey report of 2010 states that ownership of agricultural machinery and equipment was much more prevalent in rural than in urban areas.

45

Table : Number of all households owning assets by province, 2010Asset Type Centr

alCopperbelt

Eastern

Luapula

Lusaka

Northern

North Weste

rn

Southern

Western

Bed204,23

3326,73

3123,47

2130,59

9332,62

1213,55

4100,01

9235,79

1114,58

7

Mattress209,27

2332,83

6134,70

5126,39

1344,30

9224,03

1 95,930212,03

5110,02

6

Mosquito net199,61

4236,85

4265,73

8143,33

8233,20

1250,93

2105,24

3243,19

9154,93

3

Table (dining) 62,037 87,735 32,011 37,071125,69

8 55,154 36,300 51,222 44,146

Lounge suit 86,446203,02

2 35,726 24,093212,97

8 60,844 24,530 89,451 29,210

Radio/stereo140,50

0204,22

9151,62

2 72,949209,29

2133,12

8 62,846137,71

1 67,941

Television 75,929197,35

6 43,056 16,562244,23

6 37,112 20,702 82,114 23,015Satellite dish/decoder (free to air) 16,229 68,531 10,062 6,209 41,148 9,991 6,936 28,966 9,000Satellite dish/decoder (DSTV) 5,318 28,753 3,270 3,531 40,516 2,314 3,129 7,370 1,893

Other pay TV 1,026 2,881 591 5 4,039 2,206 1,254 778 1,269

DVD/VCR 35,460124,27

9 21,825 10,571141,48

4 20,918 11,988 47,358 11,121

Home theatre 11,974 37,594 6,090 3,403 61,047 5,313 4,680 23,728 4,780

Land telephone 1,741 6,690 1,112 151 4,596 353 82 1,230 703

Cellular phone135,30

0262,81

5113,48

6 55,327303,39

5100,09

7 51,011160,38

6 53,506

Computer 3,176 18,317 2,694 706 31,853 1,683 690 6,165 1,200

Watch 35,843 54,853 28,788 24,051 61,302 41,269 20,756 32,930 16,170

Clock 44,402119,53

6 33,280 22,042132,68

4 41,532 13,587 43,872 14,681

Residential Building113,35

0156,19

3227,36

1101,67

9 92,847210,11

6 75,996203,43

8161,37

6

Non residential building 10,639 8,747 10,950 8,228 6,603 7,915 2,089 5,524 3,002

Brazier/Mbaula191,62

0328,01

7142,19

8145,25

9314,18

3222,64

2 74,658151,03

9 63,685

Gas stove 836 3,280 1,433 369 4,283 188 566 1,920 86

Electric stove 28,510146,42

1 11,937 5,619194,45

1 14,176 8,884 42,551 5,522

Refrigerator 12,363 68,807 6,550 2,890100,81

2 6,570 4,259 18,945 2,718

Deep freezer 17,431 84,057 6,881 5,275 85,971 9,739 5,792 23,916 3,667

Washing machine 903 1,671 202 86 5,959 25 150 493 155

Dish washer 19,718 15,872 2,980 20,942 44,177 1,865 14,103 9,491 6,391

Air conditioner 684 2,063 1,097 93 6,925 900 667 433 61

Ventilator 30,118135,88

3 13,983 7,599169,07

6 17,529 11,065 38,190 9,984

Non electrician 81,103 92,549 54,662 50,087 56,178 82,340 25,755 67,056 23,395

Private water pump 2,167 1,089 675 66 8,856 370 132 1,821 456

Sewing machine 8,701 16,554 7,241 2,590 14,028 9,511 1,895 12,701 2,465

Hand hammer mill 1,959 14,956 5,823 2,639 1,804 5,640 631 6,088 1,749Grinding/hammer mill (powered) 1,150 552 1,300 1,377 925 1,767 754 1,104 364

Sheller 1,007 1,402 1,948 5 145 861 36 1,131 71

Rump presses oil expellers 633 165 148 1,553 21 646 40 93 -

Hand saw 17,269 17,217 14,679 8,037 14,323 13,376 5,721 12,205 9,108

Carpentry plane 3,246 8,779 9,146 3,356 6,416 6,826 1,824 3,684 4,670

46

Axe176,58

9145,59

7274,07

8157,84

6 68,631269,85

7108,93

0199,60

5166,38

9

47

Table 17 continued:

Asset TypeCentr

alCopperbelt

Eastern

Luapula

Lusaka

Northern

North Weste

rnSouth

ernWeste

rn

Pick 50,433 58,933 29,461 14,570 51,903 28,150 11,929 57,784 10,455

Hoe224,55

1258,17

0324,83

4181,22

7158,47

1295,46

0128,77

0268,48

5189,76

0

Hammer 63,375 79,693 72,520 26,305 55,485 63,123 18,669 58,687 31,399

Shovel/spade 68,972 98,103 47,422 25,528 76,706 46,111 26,866 65,140 39,630

Fishing net 2,674 3,947 1,681 37,521 2,215 34,925 4,258 10,593 25,669

Hunting gun 4,248 1,048 1,244 477 2,037 1,550 1,882 2,072 2,541

Plough 38,829 2,337 62,468 86 4,816 3,479 1,179 81,829 23,830

Crop sprayer 29,797 8,977 50,547 609 7,081 6,613 1,237 20,932 1,655

Knitting machine 1,844 730 128 38 1,857 74 77 2,176 336

Lawn mowers 108 1,203 225 - 628 20 109 719 20

Generator 3,759 2,486 4,295 1,210 3,019 1,442 803 1,356 800

Small/hand-driven tractor 595 22 - - 292 38 - 340 20

Wheel tractor 1,468 628 325 48 2,033 468 17 1,071 -

Wheel barrow 20,053 30,851 10,323 4,659 27,681 12,551 4,452 16,674 2,491

Scotch cart 18,428 1,381 28,975 255 1,508 684 1,279 29,143 5,931

Bicycle126,05

2 89,578182,52

8 99,483 48,424160,14

9 59,247110,99

3 26,326

Motor cycle 2,017 819 2,477 306 1,074 1,228 1,893 2,625 1,192

Large truck 367 1,620 383 125 791 558 15 155 17

Small/pick up truck 1,879 2,752 908 261 2,124 490 341 1,419 128

Van/minibus 919 5,752 1,130 106 4,673 1,085 402 2,203 197

Car 5,075 27,364 4,028 831 39,496 1,570 1,415 6,916 631

Canoe 1,159 989 378 14,630 596 14,441 1,934 3,085 13,803

Boat 754 211 933 5,201 286 2,388 286 1,270 661

Oxen 25,448 1,389 46,776 257 1,526 1,290 2,522 40,154 15,238

Donkey 215 98 303 - - - 28 1,014 277

48

Table : Value of assets owned by all households by province, 2010 in ZMK Millions

CentralCopper

beltEaster

nLuapul

a LusakaNorthe

rn

North Wester

n

Southern

Western

Bed 27,568 59,294 18,774 14,459 78,642 22,806 14,859 39,737 19,285

Mattress 33,975 60,138 20,697 19,256 63,975 36,230 16,676 35,079 20,052

Mosquito net 2,104 3,619 2,015 1,094 2,945 1,696 1,752 4,298 1,283

Table (dining) 13,411 41,725 6,578 8,877 50,474 7,048 11,115 10,656 5,776

Lounge suit 62,171 202,035 28,008 17,187 214,087 34,853 23,040 59,628 28,233

Radio/stereo 34,280 81,920 21,839 13,600 86,638 21,551 16,334 30,559 14,703

Television 36,436 128,969 21,132 9,069 157,979 19,724 11,747 63,790 15,375Satellite dish/decoder (free to air) 7,649 29,921 5,134 3,986 15,944 6,016 3,819 11,170 4,024Satellite dish/decoder (DSTV) 2,273 16,726 2,006 3,847 23,167 915 2,028 3,219 1,025

Other pay TV 58 549 88 2 831 158 343 103 446

DVD/VCR 8,792 30,684 6,091 2,621 31,232 5,222 3,324 10,912 2,902

Home theatre 9,356 35,337 14,633 2,954 50,216 4,131 5,589 16,801 5,450

Land telephone 189 1,017 140 12 993 50 5 187 158

Cellular phone 17,740 49,635 13,317 6,727 66,186 13,129 8,369 25,663 7,092

Computer 6,393 43,036 6,971 21,987 74,270 3,357 1,707 14,062 2,614

16 Watch 1,293 3,163 412 298 5,666 668 655 650 285

17 Clock 953 25,681 937 583 6,081 1,548 442 871 320Residential Building

1,249,435

5,380,959

1,469,793 184,147

9,869,885

1,021,736 723,148

1,576,293

298,100

Non residential building 99,771 412,984 44,475 17,850 327,682 66,075 6,233 90,067

331,509

Brazier/Mbaula 2,586 6,563 862 1,169 2,339 11,198 8,009 1,141 410

Gas stove 315 1,350 127 1 1,881 145 19 502 36

Electric stove 19,615 118,906 9,772 4,962 115,334 12,671 8,679 24,798 5,068

Refrigerator 14,059 75,377 41,482 5,306 108,753 8,722 7,507 39,257 3,227

Deep freezer 14,884 84,218 7,625 6,523 74,893 11,075 23,266 24,459 3,777

Washing machine 706 2,482 330 1 9,464 15 313 688 253

Dish washer 305 1,007 42 174 3,494 16 333 215 277

Air conditioner 131 2,088 200 7 5,337 220 399 463 53

Ventilator 1,780 8,613 981 537 11,607 1,080 664 2,229 563

Non electrician 1,257 1,399 865 789 837 1,375 430 1,251 456Private water pump 5,350 3,387 608 256 27,428 182 172 747 45

Sewing machine 2,886 7,312 2,425 1,005 5,558 3,461 487 3,900 915Hand hammer mill 3,829 504 4,007 130 43 583 5 159,913 63Grinding/hammer mill (powered) 6,374 2,154 11,731 1,722 10,558 7,151 3,288 8,046 4,441

Sheller 1,657 191 542 1 30 49 2 1,037 137Grinding/hammer mill (powered) 6,374 2,154 11,731 1,722 10,558 7,151 3,288 8,046 4,441

Sheller 1,657 191 542 1 30 49 2 1,037 137Rump presses oil expellers 247 12 1,220 17 0 127 30 2

Hand saw 448 1,796 689 285 416 948 254 408 639

Carpentry plane 164 598 461 187 498 541 98 349 406

49

Axe 1,827 1,566 2,806 2,089 802 2,114 1,295 2,029 1,798

Table 18 (continued):

CentralCopper

beltEaster

nLuapul

a LusakaNorthe

rn

North Wester

n

Southern

Western

Pick 796 1,081 638 255 1,059 487 237 984 195

Hoe 2,537 3,007 4,419 3,100 2,115 4,122 1,967 2,165 2,465

Hammer 824 11,491 4,775 295 843 798 265 848 450

Shovel/spade 1,511 2,372 1,090 565 1,831 926 796 1,515 1,130

Fishing net 287 54 11 4,390 108 1,733 38 1,090 899

Hunting gun 3,135 3,184 2,571 601 8,081 957 884 5,105 12,467

Plough 18,008 1,047 21,430 108 5,439 1,153 788 24,723 9,691

Crop sprayer 4,963 1,658 7,585 129 1,096 1,083 209 3,843 167

Knitting machine 697 467 51 8 1,352 41 102 556 143

Lawn mowers 459 2,996 10 675 14 218 81 51

Generator 4,473 14,982 7,871 1,430 6,673 958 815 1,404 1,099Small/hand-driven tractor 3,172 374 12,804 2,077 74 163

Wheel tractor 40,542 21,399 128 12 21,129 23,206 297 60,226

Wheel barrow 2,176 3,698 2,020 624 9,845 1,556 602 2,640 330

Scotch cart 15,129 773 32,477 107 1,577 1,072 1,694 28,502 66,008

Bicycle 27,539 21,771 36,890 26,073 23,879 36,778 16,657 24,654 5,675

Motor cycle 5,422 2,023 7,631 1,406 1,292 11,131 4,275 14,163 5,545

Large truck 17,654123,67

1 21,010 16,328 86,882 15,370 1,035 3,658 831Small/pick up truck 38,515 94,540 26,224 5,777 48,657 15,678 16,043 41,723 7,564

Van/minibus 15,261141,70

2 16,197 3,250 85,309 64,192 8,393 55,584 12,684

Car103,47

7552,71

1 68,280 10,3311,010,4

86 27,747 25,969 126,857 10,461

Canoe 285 119 51 2,048 206 2,482 276 1,119 2,637

Boat 1,984 1,264 1,846 3,849 1,634 1,779 94 1,602 307

Oxen 54,931 3,099 119,533 659 2,716 4,560 4,089 565,407 26,236

Donkey 254 78 1149 0 28 1144 175

5 CONCLUSIONS

5.1 General

Zambia’s economic performance has been impressive over the last few years with real GDP growing from 5.0 percent in 2005 to 7.6 percent in 2010. Agricultural output performance has been satisfactory during the period, indicating potential for growth in the sector. Yet despite recording some positive economic growth in terms of GDP during the review period, Zambia still faces a number of serious challenges that need to be addressed if agriculture has to remain the engine for economic and social development.

50

Zambia is still underfunded in agriculture, resulting in the country not meeting the set target by CADDP of 10percent allocation to agriculture. Core programmes in agriculture such as research and development, extension services and rural infrastructure have remained poorly funded.

Weighted estimates show strong evidence of an indication of capital formation by the small-scale farm households in Zambia from 2004 to 2008. The rise in the number of several agricultural assets across the country (such as trucks and lories, hammer mills, rippers, shellers, sprayers, pickup, vans and cars, bicycles, motorcycles and hand driven tractors) owned by households suggests that the small and medium scale farmers have been increasing their investment in these implements over the years from 2004 to 2008. While the number of some agricultural assets is increasing on one end, it is also clear that investments in important farm implements such as disc ploughs, rump presses, and oil expellers, harrows, ox-drawn ploughs, hand hammer mills and tractors suggest reducing trends of investment over the same period. The falling numbers from 2004 to 2008 suggests low capital formation in these assets.

The number of small-scale farm households owning agricultural assets, the number of assets owned by these households as well as the value of these assets all registered increases during the period from 2004 to 2008. This also suggests an overall increase in fixed capital formation by this category of famers during the period. During the same period, fixed capital formation (in terms of the number of assets owned) was dominated by Southern, Eastern and Central Provinces, supporting an equally large number of small-scale farm households in these regions. Large increases in the value of capital formation also occurred in these same regions.

It can safely be assumed that since agricultural financing for rural farm households is either non-existent or very weak in Zambia, capital formation or investments in areas such as production, storage, mechanization and processing could be as a result of own savings by the small-scale famers.Though data on farm assets for large scale farmers was not sufficiently available, capital formation by this category of famers is also apparent in Zambia as can be seen from the results of the existing information.

While the subsidy programme under FISP is aimed and improving rural livelihoods and reducing poverty among households, it has only gone as far as creating an inefficient production and marketing system that is leading to dependency among smallholders and reduced participation of the large scale farmers and the private sector in the maize sub-sector.

In Zambia, NEPAD and CAADP are playing an important role in enhancing the effectiveness of aid by ensuring a coordinated donor effort for development assistance in the agricultural sector.

5.2 Key Messages/Issues on Agricultural Investment

The following may be highlighted, some of it being suggestions for matters that require further enquiry in future:

a. Agricultural investment in Zambia was evident during the study period. However, the magnitudes and levels of investments in agriculture may not have been correctly established as the systems for tracking investment are lacking or

51

inadequate. There is need to develop methods for tracking investments in the agricultural sector that could be used to estimate fixed capital formation in agriculture;

b. Agriculture investment in Zambia seems to be consistent with where agriculture agricultural development should be: ownership of agricultural machinery and equipment is much more prevalent in rural areas than in urban areas;

c. From the available data, it is not clear whether own investments by the small scale famers is able to leverage significant investment from other sources such as public and corporate inflows so that it is enough to propel them forward faster than they are doing now. This is an area which may require further investigation;

d. The impact of HIV/AIDS on agriculture investment, especially on own farm investment may also need investigation. This is to deal with the underlying assumption that people maybe selling off agricultural assets (i.e. disinvesting) in order to raise funds to support those affected in the household; and

e. Are subsidies contributing to capital formation in Zambia? This is a question that requires further investigation. While there is expectation that once farmers receive subsidies from government, this should unlock their resources for complementary agricultural investment in areas where they would normally not invest (if they had not received subsidies) this study did not look into the issue but it is important to assess this.

52

6 REFERENCES

Bank of Zambia: http://www.boz.zm/snapshot_inflation.htm.

Investment Opportunities in the Agricultural Sector Report, 2007.

Ministry of Agriculture and Cooperatives Annual Report, 2009.

Megill, D.J., 2004. “Recommendations on Sample Design for Post Harvest Surveys in Zambia Based on the 2000 Census”. Working Paper 10, Food Security Research Project/Zambia, Lusaka, Zambia.

National Agricultural Policy, 2004-2015.

Nicole M. Mason, William J. Burke, Arthur Shipekesa, and T. S. Jayne, 2011. The 2011 Surplus in Smallholder Maize Production in Zambia: Drivers, Beneficiaries, and Implications for Agricultural and Poverty Reduction Policies, 2011.

Sikombe Derrick, Exploring the Incentive Effects of Food Aid on Crop Production in Zambia, 2009.

Sixth National Development Plan, 2011-2015.

Zambia CAADP Compact, 2011.

53

7 ANNEXES

7.1 GDP by Kind of Economic Activity at Constant 1994 Prices (K' Billion)

54

KIND OF ECONOMIC ACTIVITY 2005 2006 2007 2008 2009 2010

Agriculture, Forestry and Fishing 448 458 460 472 506 539

Agriculture 206 212 207 211 237 269

Forestry 165 167 174 180 187 194

Fishing 77 79 80 81 83 77

Mining and Quarrying 271 291 301 309 371 428

Metal Mining 263 286 299 306 367 425

Other mining and quarrying 8 4 2 2 5 2

PRIMARY SECTOR 719 749 761 781 877 967

Manufacturing 335 355 365 372 380 396

Food, Beverages and Tobacco 206 224 241 248 261 277

Textile, and leather industries 49 48 39 30 24 14

Wood and wood products 26 26 27 31 32 35

Paper and Paper products 10 10 10 13 14 16

Chemicals, Rubber and Plastic products 30 31 32 34 34 34

Non-metallic mineral products 7 7 7 7 8 9

Basic metal products 1 1 1 2 2 2

Fabricated metal products 7 7 8 8 7 8

Electricity, Gas and Water 81 89 90 89 95 102

Construction 287 329 394 429 469 508

SECONDARY SECTOR 704 773 850 890 945 1,006

Wholesale and Retail trade 577 588 602 619 633 660

Restaurants, Bars and Hotels 80 93 102 107 93 101

Transport, Storage and Communications 204 249 297 344 370 426

Rail Transport 9 9 7 6 5 5

Road Transport 91 96 103 116 132 140

Air Transport 38 51 63 72 55 66

Communications 66 93 124 150 179 215

Financial Intermediaries and Insurance 235 245 255 277 291 308

Real Estate and Business services 287 296 305 315 324 333

Community, Social and Personal Services 236 257 289 323 351 369

Public Admin. & Defence; Public & Sanitary services 117 107 122 125 126 122

Education 77 104 118 141 163 182

Health 15 16 16 19 20 21

Recreation, Religious,Culture 13 15 17 21 25 26

Personal Services 15 15 16 17 17 18

TERTIARY SECTOR 1,619 1,728 1,850 1,984 2,061 2,198

Less: FISIM (138) (142) (145) (149) (154) (157)

TOTAL GROSS VALUE ADDED 2,904 3,108 3,317 3,505 3,730 4,013

Taxes less subsidies on Products 256 248 247 261 278 299

TOTAL G.D.P. AT MARKET PRICES 3,159 3,356 3,564 3,766 4,008 4,313

Real growth rates 5.3 6.2 6.2 5.7 6.4 7.6 Source: CSO

Year

55

7.1 Other Macro-Economic Indicators

Year

Foreign Exchange Rate ZMK

to USD

Consumer Price Index

(annual growth, %)

Food Price Index

(annual growth, %)

Annual Inflation

Rate(annual growth,

%)

2005 4,463 18.3 18.6 18.3

2006 3,603 9 4.9 9.0

2007 4,003 10.7 5.3 10.7

2008 3,746 12.4 13.8 12.4

2009 5,046 13.4 14.2 13.4

2010 4,797 8.5 5.2 8.5 source: CSO

7.2 Production Output for Major Crops in Metric Tonnes (2005 – 2010)

Crop 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

Maize 866,187 1,424,439 1,366,158 1,211,566 1,887,010 2,795,483

Sorghum 18,714 21,047 12,773 9,992 21,829 27,732

Millet 29,583 48,159 21,707 33,934 48,967 47,997

Paddy Rice 13,337 13,964 18,317 24,023 41,929 51,656

Sunflower 8,112 15,003 8,953 12,662 33,653 26,420

Groundnuts 74,218 84,010 55,215 70,527 120,564 164,602

Soya Beans 89,660 57,815 55,194 56,839 118,794 111,888

Seed Cotton 155,213 118,425 54,886 71,820 87,018 72,482

Mixed Beans 23,098 27,697 24,164 44,463 46,729 65,265

Burley Tobacco 13,094 7,742 24,011 4,659 8,758 9,809

Virginia Tobacco 23,211 14,685 15,562 17,005 18,487 22,074

Cassava 1,056,000 1,059,887 1,185,599 1,160,853 1,151,700 1,179,657 Source: MACO

Agricultural Season

56

7.3 Area Planted to Major Crops in Hectares (2005 – 2010)

Crop 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

Maize 834,981 784,524 872,812 928,224 1,125,466

Sorghum 57,432 43,627 31,596 24,349 40,485

Millet 63,411 69,529 56,817 45,508 61,626

Paddy Rice 18,243 14,358 20,067 25,177 31,032

Sunflower 31,191 39,416 28,829 32,491 71,290

Groundnuts 161,962 144,250 147,320 144,201 216,126

Soya Beans 65,170 44,034 38,947 32,404 64,680

Seed Cotton 176,217 152,262 89,312 111,307 103,154

Mixed Beans 50,496 54,532 55,663 59,588 83,627

Burley Tobacco 9,804 6,439 55,508 1,815 7,785

Virginia Tobacco 15,630 8,521 8,265 9,299 11,638

Cassava 361,026 362,355 391,844 396,874 393,743 Source: MACO

Agricultural Season

7.4 Livestock Population (2000 – 2004)

Year Cattle Goat Pig Sheep

2000 2,620,987 886,987 308,872 61,268

2001 2,490,990 934,485 269,972 66,627

2002 2,517,550 856,810 276,791 60,947

2003 2,375,453 966,264 268,599 76,799

2004 2,341,970 1,002,376 286,726 97,605 source: MACO

Type of Livestock

57

7.5 Public Allocations to the Crops Sub-Sector in Zambian Kwacha (2004 – 2010)

YearPersonnel

Emolument Goods and Services Capital AllocationSubsisidies Grants and

Social Benefits Other Total

2004 47,784,961,314 135,168,648,872 14,196,000,000 5,708,083,900 - 202,857,694,086

2005 15,049,777,375 217,803,065,298 8,904,441,056 2,351,341,200 - 244,108,624,929

2006 17,101,607,552 33,251,892,609 - 234,609,758,200 5,705,417,269 290,668,675,630

2007 23,641,037,081 45,827,346,644 - 353,573,204,281 18,956,257,832 441,997,845,838

2008 23,651,000,612 210,610,515,491 - 82,551,100,000 13,165,987,250 329,978,603,353

2009 27,994,358,000 38,311,362,131 - 529,225,500,000 14,530,653,086 610,061,873,217

2010 24,521,283,947 559,362,032,298 - 2,359,633,406 2,775,333,200 589,018,282,851 Source: GRZ

zambia case study - home | food and agriculture ... production and productivity zambia case study by...

Documents